If Australian Foundation Investment Co Ltd (ASX: AFI) shares are on your radar this October, you might be keen to know what you'd be investing in.
AFIC is a listed investment company (LIC) that trades on both the ASX and NZX, with a history dating all the way back to 1928.
The LIC invests in a portfolio of primarily ASX shares with a long-term, fundamental, bottom-up investment style. The suggested investment period is five to 10 years or longer.
While most exchange-traded funds (ETFs) passively track an index, LICs are usually actively managed investments.
The main difference between a LIC and an ETF is the structure. An ETF is open-ended, whereas a LIC is closed-ended, which means that a fixed number of shares are issued.
What's more, ETFs tend to offer greater transparency. ETF issuers typically update their full list of holdings daily, whereas LICs usually provide a snapshot of their portfolio at the end of each month.
Now that we're in October, AFIC has released its monthly update for September.
As at 30 September 2022, the monthly net tangible asset (NTA) backing for AFIC shares was $6.42 before tax and $5.53 after tax.
Put simply, NTA is the total value of AFIC's investment portfolio divided by the number of shares it has on issue.
With AFIC shares closing out September at $7.32, they were trading at a premium to their NTA, which has been the case for a few years now.
What does AFIC invest in?
It's time to pop the hood. These were AFIC's top 10 holdings at the end of September:
- Commonwealth Bank of Australia (ASX: CBA)
- CSL Limited (ASX: CSL)
- BHP Group Ltd (ASX: BHP)
- Transurban Group (ASX: TCL)
- Macquarie Group Ltd (ASX: MQG)
- National Australia Bank Ltd (ASX: NAB)
- Westpac Banking Corp (ASX: WBC)
- Wesfarmers Ltd (ASX: WES)
- Woolworths Group Ltd (ASX: WOW)
- Mainfreight Limited (NZE: MFT)
Since August, the only change in the top 10 has been Wesfarmers shuffling down two places to become the eighth-largest holding in AFIC's portfolio.
Indeed, Wesfarmers shares tumbled 9% across September, whereas the two big ASX banks suffered a more muted fall.
How does AFIC stack up against the ASX 200?
Compared to the S&P/ASX 200 Index (ASX: XJO), AFIC's top 10 is less weighted towards the big banks and miners.
The ASX's largest company, BHP, has lost its crown, being relegated to third place in AFIC's portfolio. Australia and New Zealand Banking Group Ltd (ASX: ANZ) and Woodside Energy Group Ltd (ASX: WDS) are notably missing in action. Meanwhile, AFIC is giving Transurban a big vote of confidence.
At the end of September, AFIC's largest sector weighting belonged to financials, which accounted for around 28% of the portfolio. Next up were materials at 15%, closely followed by health care at 14% and then industrials at 12%.
In contrast, the BetaShares Australia 200 ETF (ASX: A200), which aims to track the ASX 200 index, had a 29% weighting to financials shares at the end of September. A further 23% of the portfolio was exposed to materials, followed by health care at 11% and energy at 6%.
In terms of share price growth and dividends, AFIC has outperformed the S&P/ASX 200 Accumulation Index over a 10-year period. According to AFIC, it's delivered an average of 11.1% per annum compared to the benchmark's 10% per annum.
